The Bank of Japan will potentially raise interest rates three times this year to double the current level if the yen¡¯s weakness persists, according to Citigroup¡¯s markets head for the country.
Should the dollar rise above ?160, the central bank is likely to lift the overnight call rate by a quarter of a percentage point to 1% in April, Akira Hoshino said in an interview. He sees scope for another hike of the same size in July, and possibly a third by year-end if the Japanese currency stays low.
¡°Put simply, the yen¡¯s weakness is being driven by negative real interest rates,¡± Hoshino said, referring to a situation in which yields remain below inflation. The BOJ ¡°has no choice other than to address this¡± if it wants to reverse the exchange rate¡¯s direction, he said.
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